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Contract Selectivity, Food Safety, and Traceability

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  • Starbird S. Andrew

    (Santa Clara University)

  • Amanor-Boadu Vincent

    (Kansas State University)

Abstract

Contracts are an increasingly common method for coordinating exchange in the food industry. Contracts often include specifications for product attributes including food safety. One of the goals of explicit safety specifications is to discourage or deter suppliers who would deliver unsafe food. In this article, we use a principal-agent model in the context of adverse selection to examine how contracts that include traceability can be used to select against producers who cannot meet a processor's safety specifications. We find that the motivation to select against unsafe producers depends on the magnitude of the failure costs and the proportion of the failure costs allocated to producers. We also identify the conditions under which the processor selects against unsafe producers regardless of traceability. Our results are important to regulators and negotiators who want to support safe producers and deter unsafe producers.

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File URL: http://www.degruyter.com/view/j/jafio.2007.5.1/jafio.2007.5.1.1141/jafio.2007.5.1.1141.xml?format=INT
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Bibliographic Info

Article provided by De Gruyter in its journal Journal of Agricultural & Food Industrial Organization.

Volume (Year): 5 (2007)
Issue (Month): 1 (February)
Pages: 1-22

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Handle: RePEc:bpj:bjafio:v:5:y:2007:i:1:n:2

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Web page: http://www.degruyter.com

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Cited by:
  1. Diogo M. Souza-Monteiro & Julie A. Caswell, 2010. "The Economics of Voluntary Traceability in Multi-Ingredient Food Chains," Agribusiness, John Wiley & Sons, Ltd., vol. 26(1), pages 122-142.
  2. Brofman, Freddy & Garcia Martinez, Marian & Souza Monteiro, Diogo M., 2008. "Economic Evaluation of Food Traceability Systems through Reference Models," 110th Seminar, February 18-22, 2008, Innsbruck-Igls, Austria 49772, European Association of Agricultural Economists.
  3. Cristina Grazia & Abdelhakim Hammoudi & Oualid Hamza, 2012. "Sanitary and phytosanitary standards: Does consumers’ health protection justify developing countries’ producers’ exclusion?," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 93(2), pages 145-170.
  4. Cristina Grazia & Abdelhakim Hammoudi & Oualid Hamza, 2012. "Sanitary and phytosanitary standards: Does consumers' health protection justify developing countries' producers' exclusion?," Post-Print hal-00939245, HAL.
  5. Souza Monteiro, Diogo M. & Caswell, Julie A., 2008. "Optimal choice of Voluntary traceability as a food risk management tool," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44394, European Association of Agricultural Economists.
  6. Giraud-Heraud, Eric & Grazia, Cristina & Hammoudi, Abdelhakim, 2007. "Agrifood safety standards, market power and consumer misperceptions," 105th Seminar, March 8-10, 2007, Bologna, Italy 7849, European Association of Agricultural Economists.

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